What are securities?

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Let’s start with financial instruments that help you understand the securities.

You can say, financial instruments are assets where money and trade are involved.

Which you buy and sell. You trade the assets. It is a virtual or real document where two parties are involved during trade or transactions in financial instruments.

Photo by Tezos on Unsplash

The best example of financial instrument is bonds and stocks.

There are three financial instruments and two asset classes: debt-based and equity-based.

1- Cash instruments:

Example- Securities, deposits, and loans.

2- Derivative instruments:

Example- Resources, currency, bonds, stocks, and stock indexes.

3- Foreign exchange instruments such as currency agreements and derivatives.

We will talk about the types and classes later point of time. But, for now, we will stick to securities.

As you see, under cash instruments, there are securities, for example.

Securities are financial instruments.

Companies, financial instruments, Govt issue securities to raise funds.

And security market helps you transfer the securities from one another when you trade them since its financial instruments.

It has to be exchanged between two parties.

Companies issue securities as they need money; you buy them as you need to invest in getting returns.

And security market helps you make that truncation and transfer of security easy.

You buy securities as you have money to invest in return.

Ideally, when you invest, you convert your saving into financial assets. So you can get a return.

You do trade by security market. Security markets provide you platform.

The term security includes Stocks, Bonds, Debentures, debenture stocks, and derivatives.

As you see, there are many financial instruments you can find in the market.

Such as equity Shares, which companies issue, and through companies and stock exchange. It is regulated by SEBI, companies act.

Securitas is issued in the security market and purchased by investors.

You buy and sell the securities in the market.

There are two types of the security market.

The primary market is where the new issue comes from, like IPO.

The secondary market is where you trade the securities already issued by companies.

Securities markets are markets in which you buy and sell, do trade stocks, bonds, and Deposits. It is a financial instrument that companies issue to raise funds.

The securities markets can be classified into two segments: primary markets and secondary markets.

Primary markets issue the initial offering of securities to the public.

Secondary markets enable securities to be traded between investors.

The primary market is divided into public (IPO or initial public offering) and private placements.

On the other hand, the secondary market enables existing securities to be traded between investors.

Traders and investors use it to purchase and sell the previously issued securities.

As you see in the above chart, our financial market consists of different needs.

It also consists of buyers of securities, such as investors.

It has issuers of securities, such as people who use your money and funds for business.

Intermediaries and regulatory bodies, such as SEBI, RBI, etc.

Security Market is where companies issue the security for you, like stock and bonds, etc., where you purchase these.

Now, the Securities market helps you with a framework; it gives you a platform where you can easily invest.

It helps you buy and sell securities quickly.

The securities market ensures your money and the buy-and-sell process are well organized through the channel.

Securities include stocks, bonds, debentures, derivatives, and government securities.

At the level, you can classify it as equity and debt. It protects your rights and security terms. All the security risks and returns are different, which we will discuss later in this post.

For example, stock, debt, FD, and all have terms, your rights, risk, and return.

How can we define security?

  • When there is an exchange of money between two parties.
  • When a company, financial institutes, Govt issues securities, you purchase them to invest.
  • Where you can invest in getting returns and